THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), AHMEDABAD vs. AMBE TRADECORP PRIVATE LIMITED

TAXAP/306/2022HC GujaratGJHC24035013202205 July 2022Author: HONOURABLE MR. JUSTICE N.V.ANJARIA,HONOURABLE MR. JUSTICE BHARGAV D. KARIA4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises from the order of the Appellate Tribunal. The Court found that the Tribunal had rightly confirmed the findings of the CIT(A). The Tribunal had noted that the assessee had furnished necessary documentary evidence, including ledger accounts, bank statements, income tax returns, and balance sheets. Furthermore, the loan creditors had responded to notices issued under Section 133(6) of the Income Tax Act, thereby establishing their identity. The Court also considered the fact that the loans were repaid by account payee cheques and that the assessee was not the beneficiary of the loans, which supported the genuineness and creditworthiness of the transactions. The Tribunal's reliance on the principle that once repayment is established, credit entries cannot be viewed in isolation, especially when debit entries are carried out in later years, was deemed appropriate. The Court concluded that the impugned transactions were business transactions and their genuineness could not be doubted. Therefore, the appeal was dismissed as meritless.

What were the facts?

The assessee, Ambe Tradecorp Private Limited, is in appeal against an order of the Income Tax Appellate Tribunal (ITAT). The assessment year in question is 2012-2013. The dispute concerns an addition of Rs. 32,20,00,000/- made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, on account of unexplained cash credits. The AO treated two loan transactions, Rs. 8,50,00,000/- from M/s. J.A Infracon Private Limited and Rs. 23,70,00,000/- from M/s. Satya Retail Private Limited, as sham due to alleged lack of creditworthiness of the lenders. The Commissioner of Income Tax (Appeals) deleted the addition, finding that the identity, creditworthiness, and genuineness of the loan transactions were established. The ITAT confirmed the CIT(A)'s order. The revenue has filed the present appeal before the High Court.

What were the issues?

1. Whether the Appellate Tribunal committed an ex-facie perverse error in deleting the addition of Rs. 32,20,00,000/- made under Section 68 of the Income Tax Act, 1961, on account of unexplained cash credit? Assessee's Contentions: The judgment does not record specific contentions made by the assessee before the High Court. However, the findings of the lower appellate authorities, which were upheld by the Tribunal, indicate that the assessee had provided ledger accounts, confirmations, bank statements, income tax returns, and balance sheets for the loan transactions. The assessee also complied with notices issued under Section 133(6) of the Act. The loans were repaid in subsequent years by account payee cheques, and the assessee was not the beneficiary of the loans. Revenue's Contentions: The revenue argued that for the application of Section 68, three ingredients are necessary: identity of the parties, creditworthiness of the parties, and genuineness of the transaction. The revenue contended that none of these ingredients were satisfied in this case, and the transactions were in the nature of accommodation entries. The revenue sought to establish that the transactions had only presumptive and assumptive value not supported by factual data.

Which sections of the Income-tax Act were involved?

Section 68,Section 133(6)

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Cause title — parties, addresses and appearances
C/TAXAP/306/2022 ORDER DATED: 05/07/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 306 of 2022 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), AHMEDABAD Versus AMBE TRADECORP PRIVATE LIMITED ========================================================== Appearance: MR MANISH BHATT. SR ADVOCATE with KARAN SANGHANI for M R BHATT & CO.(5953) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 05/07/2022

ORAL ORDER (PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) Heard learned senior advocate Mr.Manish Bhatt with learned advocate Mr.Karan Sanghani for M.R.Bhatt & Co. for the appellant.

2.

The revenue seeks to raise grievance about deletion on part of the Appellate Tribunal of addition of Rs.32,20,00,000/- made under Section 68 of the Income Tax Act on the count of unexplained cash credit. It is in this respect that the substantial questions of law is proposed as

The order continues below.

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